Cardigan-clad men charge Sydney's streets for art

(2:05)

Jogging is popular in Sydney’s central business district though not often the subject of art. For the Biennale of Sydney, 16 cardigan-clad men jog in unison through the streets for a performance piece by Lithuanian-born Egle Budvytyte.

As for me, I try to be agnostic about gold. Any investment you make money on is a good investment in my view.

So rather than debate whether or not gold is “good” for investors, I’d prefer to focus on the short-term and medium-term outlook for the precious metal.

That means the million-dollar question is whether or not gold will go up from here in the next few months or so.

And here’s both sides of the argument:

The case for gold

Momentum: While gold took a beating last year, dropping about 28% for its worst annual drop since 1984, the precious metal is now one of the market’s top performers among all asset classes. Gold is up about 13% from lows around New Year’s, while the year to date return for the S&P 500
SPX, -0.45%
isn’t even 2%. Making a quick profit in gold during a sideways stock market has gone a long way towards improving sentiment regarding precious metals.

Geopolitics: A big reason for gold’s run is the crisis in Crimea. When things get rocky, investors hide out in gold as the ultimate safe haven. While the standoff between Ukraine and Russia is fluid, it seems unlikely that the tensions are going away anytime soon as Obama and Putin spar over sanctions. That could create a “risk premium” for gold for some time.

Eastern demand: In addition to western speculators, gold has been flowing east quickly. China has seen record demand for coins, bars and jewelry amid relative low pricing for the precious metal in the last year. In fact, Bloomberg reported in January that UBS and Deutsche Bank are opening new vaults in the region to feed the “insatiable” demand there. And while China recently surpassed India as the world’s largest buyer, India’s hunger for the yellow metal has continued briskly, too. Demand for gold used in gifts as a sign of good fortune for weddings and festivals is so strong that smuggling has become a serious issue in the region as Indians look to skirt import limits to satiate their robust demand for gold.

100,000 free tubes of toothpaste hit NYC

(3:06)

After losing a fight with Procter & Gamble over labeling, Hello Products is turning a court order to stop selling its toothpaste into a marketing opportunity by giving away 100,000 tubes of toothpaste on the streets of Manhattan.

Risk off: All these items aside, the short-term outlook of gold could be bolstered most by a fear that global risk for stocks is increasing. With the Federal Reserve looking to tighten policy, many are concerned that the U.S. stock market could take a hit. And China’s economy, while still growing, continues to disappoint investors and drag down other emerging markets. If you’re worried about stocks being overbought after a roaring run in 2013, hiding out in gold is looking increasingly attractive. After all, what’s your alternative? Bonds, with meager yield and the risk of principal losses should rates rise?

The case against gold

What goes up comes down: Undoubtedly, some of the buying three months ago was from speculators who thought gold was at or near the bottom. And maybe it was...but after the brisk run, it’s not anymore. Remember, a MarketWatch survey of investment banks at the start of the year showed price targets that averaged $1,209 with a low of $1,141. Gold briefly pushed under the $1,200 mark and perhaps rightly seemed like a value to investors. But now, with the precious metal around $1,340, it’s significantly above all major investment bank targets for gold and no longer a bargain.

The Fed: Sure, the tapering of quantitative easing could continue to rattle investors, as we saw with the Dow dropping 100 points on news that the Fed would reduce its quantitative easing bond purchases by another $10 billion. But don’t forget that tighter central bank policies also can significantly affect gold prices. After all, gold performs best in an inflationary environment but the fact that most expect the Federal Reserve to raise rates within the next year could put a serious lid on any inflation scenarios — and a lid on commodity prices as a result.

Stocks won’t stop: While it’s true that some investors are leery of the rally, it’s also true that investors have been hating on this market since 2009. While people will continue to trot out charts and hysterical headlines about a 99.9% chance of a crash, the bottom line is that valuations are not outside historical norms. The forward price-to-earnings ratio of the S&P 500 is around 15.5 right now, and data from Factset show that as recently as 2005 we saw a forward PE of over 16, and for those who forget, 2005 was right in the middle of another massive bull-market run. So be careful with your notion that gold is the only safe place to park your cash right now and that stocks “have to” crash.

A long way to go: While there has admittedly been recent strength to gold, it has a long way to go. Gold-backed funds saw massive outflows of 881 tonnes last year. And while the largest exchange traded gold fund, the SPDR Gold Trust
GLD, -0.18%
, finished February with its first inflows since December 2012, the total equaled a mere 10 tonnes. It’s encouraging to see some stability, sure. But let’s not consider an end to the pain in gold as a sure sign that more upside remains.

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